After the initial surge higher based upon headlines coming out of London, we turned right back around as traders realized it was simply Theresa May trying to get the same package pass-through Parliament again. With this, the market has spoken and it shows that the traders out there don’t particularly have any faith. At this point, it looks as if we will go looking towards the major support level underneath at the 1.25 handle. This is a level that should continue to cause a lot of support. It is a large, round, psychologically significant figure, and it looks very likely that the market will have its next major battle there. In the meantime, it looks as if we are going to drift in that general direction.
GBP/USD Video 23.05.19
The alternate scenario is of course that we turn around and break above the 1.28 handle, which would be a very bullish sign. At that point it’s likely that we would go looking towards the 1.30 level. That area is significant resistance, and I think that would be the next major battlefield after a turnaround. Quite frankly, I think at this point we are more than likely going to test the 1.25 level though, so I am willing to short this pair for a short-term trade. Longer-term, I believe that value hunters will come back in and start picking up the British pound as it is very cheap at this level. A break down below the 1.25 level would be extraordinarily negative, and could bring in a whole new dark cloud over Sterling.
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This article was originally posted on FX Empire
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